The proposed research will develop a model to compare costs and effectiveness of a traditional state hospital inpatient program and a publicly funded alternative program for the treatment and care of the most disabled chronically mentally ill. The study features comprehensive cost assessment in facilities operated by or contracting with state gov't. SPECIFIC AIMS: 1. Building on the work of Weisbrod, Test and Stein (1), the first aim of this research is to develop a method for identifying the cost of treating and maintaining the chronically mentally ill whose care is primarily supported by public resources. 2. This model will then be applied to an assessment of the costs and effectiveness of traditional inpatient care comparing it to an experimental Quarterway House at the Massachussetts Mental Health Center, a state facility responsible for care of chronic patients in an urban, racially and economically mixed catchment area. 3. The distributional issues of who pays the cost of the alternative programs will be considered. There are a number of perspectives from which the cost will be calculated: the agency, the state, the federal gov't. and society as a whole. 4. A plan to distribute this to state officials, key legislative staff in 50 states, and policy study groups, immediately upon completion of the research, is described. This proposed study is an opportunity to identify, measure and compare costs to society over two years for severely disabled chronically mentally ill individuals and to apply the model to a small sample of patients randomly assigned to an experimental residential treatment program and to a traditional inpatient ward of a public teaching hospital. Prospective longitudinal outcome data have already been collected. ANALYSIS: Cost data, to be gathered in the course of this project, will fall into the following categories: mental health inpatient and residential care costs, outpatient mental health care costs, medical costs, law enforcement costs, social support costs, and other costs. Level of functioning, tenure in the community, amount of restriction and victimization outcome or effectiveness data will not be monetized. The methodological issues to be dealt with include: valuation of public facilities, especially land & structures, distinguishing between fixed and variable cost, and allocating common costs when a program is part of a larger administrative unit. Study of these issues is important as the federal gov't considers radical changes in the fundings of programs for the chronically ill populations. Calculation of the cost of the alternative treatment programs from the perspective of the agency, the state & federal gov't., and society will be included.